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You don’t have to look far to see that there is currently something unprecedented going on in the automotive industry. From the empty dealership lots you drive by, to the news stories you’re hearing about a “chip shortage,” it’s clear something very serious is impacting manufacturers, dealers, and ultimately people like you and me; consumers.
We’ve documented in the past how the ongoing semiconductor (chip) shortage is wreaking havoc on manufacturer’s ability to produce new vehicles. Ford is storing F-150’s in country fields and race tracks, Jaguar Land Rover is informing their investors that they’re losing more money than anticipated because of the shortage, and dealers are making record profits because they can sell their limited inventory above sticker price (MSRP).
To suggest that what’s going on in the market right now is ridiculous would be an understatement. We’ve never seen anything like it.
Traditionally, buying a car can be pretty intimidating. You find something online, go into the dealership, sign the paperwork and then you’re left wondering, “did I get a good deal?” In today’s market the answer more and more frequently is “no.”
Uninformed buyers are agreeing to pay for crazy add-ons, unheard of additional dealer markup, and ridiculous F&I products, simply because they don’t know better. That’s why today we want to share with you the simplest explanation for why you should be leasing a vehicle right now instead of buying it. If you know someone who is thinking about getting a car in this market, please consider sharing this with them.
Here we go …
Why you don’t want to finance a car, truck, or SUV right now
To understand why leasing is the smarter option today, let’s start by explaining why financing (i.e. taking out a loan to purchase) a vehicle is not advisable right now. I wrote about this in depth a few weeks ago, but the long and short of it is this:
Vehicle prices are inflated, which means the loan you take out on the vehicle will be for the inflated purchase price. Let’s say you get a five year loan, well, over the next five years as vehicle prices normalize, you’ll still have your loan for the original amount (when prices were inflated). This means you’ll be in a major negative equity position (the vehicle will be worth considerably less than what you owe on the loan).
Why is this important? Because in normal times many people would find themselves in $2,000 to $3,000 “negative equity” positions, and that was without inflated vehicle prices at the time of purchase. In today’s market, those same people will find themselves in much more severe negative equity positions because they took out a loan on something that isn’t actually worth as much as it’s selling for right now.
So what options do you have?
Leasing means you don’t own anything, and that’s great
This is where leasing comes into the picture. When you lease a vehicle you don’t own it, you rent it. Leases make a lot of sense in today’s market because they allow you to fulfill your need (having mobility), while also mitigating your risk of taking on debt that will burden you into the future.
Let’s look at a tangible example. Here’s a lease deal for a 2021 Toyota Camry:
You can see the MSRP is $26,701, and the dealership is selling the vehicle at that price. The residual value is down in the bottom left, and it is 52%. That means that at the end of the lease term (36 months and 36,000 miles) the leasing company (Toyota Financial Services) expects the vehicle to be worth 52% of its original value ($13,885).
The residual value is not negotiable. It is the best guess from Toyota as to what they think the vehicle will be worth at the end of the lease term. Since the pandemic we have not seen meaningful changes in residual values. This makes sense, because the residual value is an estimate as to what the vehicle will be worth in three or four years, not next week. Even with inflated vehicle values today, leasing companies expect their vehicles to return to a normal depreciation curve in the future.
By leasing, you are effectively renting the vehicle for 48% of its depreciation.
Your other option is to finance the purchase of the vehicle. If you do that you will be financing the total purchase price, plus taxes, plus fees. On this Camry deal that likely comes out to $30,000. Typically Camry’s would sell with a dealer discount and significant manufacturer rebates. Obviously in today’s market that’s not what’s going on.
Once used vehicle prices return to normal and this Camry depreciates as expected, you’ll owe significantly more on the loan than what the vehicle is worth. Compare that to our leasing option, and after three years you can walk away from the lease and purchase a Camry then (likely with the dealer discount and the manufacturer incentives we’re accustomed to).
The real benefit of leasing right now is that it means you will not be in a severe negative equity position in three years, and by that time vehicle prices will have normalized as new car supply has returned to normal. At that point it would make much more sense to purchase a vehicle (new or used) since their prices will not be inflated.
In the meantime, if you do finance a vehicle, be prepared to face a sobering reality when you check the value of your vehicle in 24 months. It’s going to depreciate, and if your loan is for thousands of dollars more than what it’s actually worth, that’s going to be a tough pill to swallow.
Currently, there is a global shortage of new cars, trucks, and SUVs. Manufacturers like Ford, GM, and many others have been struggling for months to supply their dealerships with enough new inventory to keep up with demand.
Market days supply, a metric that sales managers and industry executives track religiously, is at historic lows. Dealerships typically carry a 60 to 90 days supply of inventory. This means that if a dealership did not receive another vehicle, they would have enough inventory to meet demand for 60 to 90 days. To paint a picture of how dire the situation is, Subaru currently has an 8 day supply of inventory. 8 days.
Why is there a lack of supply? Because of an ongoing semiconductor shortage that has plagued the automotive industry for all of 2021, and likely into 2022.
The “chip shortage” as many are referring to it, and the subsequent new vehicle shortage have had ripple effects across the entire automotive industry. With fewer new vehicles available for sale, used car prices have skyrocketed. Used vehicles are worth 25% more right now than they were at this exact same time last year. Considering a car is a depreciating asset, that’s not supposed to happen.
It’s fair to say that we’re currently experiencing a seller’s market of unprecedented magnitude. That being said, many people find themselves in a position where they need to buy a vehicle. In that case, there are a few things to be aware of in advance of signing on the dotted line of your buyer’s order.
As we’ve learned from CarEdge Community members who work in dealerships and financial institutions, lenders are still financing vehicle purchases, even as loan to value ratios are severely out of whack. What impact will consumers face once the bubble bursts? Let’s unpack exactly that.
When you buy a car it depreciates. The exception to this rule has been 2021, however we expect that once new vehicle production returns to normal, all vehicles will depreciate as per usual.
Before the chip shortage, a car buyer could expect their new vehicle to depreciate about 20% in their first year of ownership. For many owners who financed their purchase, this meant that they likely owed more on their loan than what the vehicle’s market value is after one year.
How so? Consider this scenario.
If you bought a $40,000 car and it depreciates 20%, it’s worth $32,000 after one year. Even though the vehicle selling price was $40,000, you likely financed more than $40,000. This is because the selling price of a vehicle isn’t the actual, or total price you pay. The total price is what we refer to as the out the door (OTD) price. The OTD price includes all fees, taxes, and accessories. When you finance a vehicle you finance the OTD price, PLUS any ancillary products you purchase in the finance office (unless you purchase them in full upfront).
That means your loan amount will be more than the $40,000 selling price (unless of course you plan to pay taxes and fees in cash, or make a substantial down payment). Every state and locale has different tax codes (we calculate those for you in our free OTD Price Calculator!), and dealer fees vary from state to state (we’re looking at you Florida), but a general rule of thumb is that your OTD price will be 10% higher than the selling price of the vehicle.
That $40,000 purchase is actually a $44,000 purchase, and unless you’re putting some serious cash down, you can quickly see how you’ll be in a negative equity position the moment you drive off the dealership’s lot. Your loan is for $44,000 (with zero down), and the value of the vehicle you are purchasing (new) is $40,000. You’re already in a $4,000 negative equity position.
What we described above is a typical negative equity situation consumers would face last year (pre-pandemic). Our concern is what will inevitably happen to consumers in 12, 24, or 36 months from now. Their negative equity position will be magnitudes greater than the example we just shared.
What’s going on right now
New vehicles are frequently selling for thousands of dollars over MSRP. Consumers are buying and financing thousands of dollars of “additional dealer markup” simply because of the supply shortage. In 2021, on a new Kia Telluride with $8,000 in additional dealer markup, you may have financed $54,000 on a $40,000 MSRP vehicle. That’s a serious negative equity position!
This is a real out the door price worksheet from a CarEdge Member. Craziness.
That being said, many lenders are not approving loans without significant cash down payments. Lenders need to abide by loan to value ratios that make sense based on your credit score and history. However, from everyone we’ve met with, lenders are still lending, and somehow consumers are manufacturing a large enough down payment to justify getting a loan approved.
Right now, at this very moment, the new Kia Telluride you just bought brand new might actually be worth MORE now that it’s a used vehicle (what a crazy time we are living in), however that is exactly the “bubble” we are talking about. Everyone knows that the Kia Telluride you just bought with $8,000 in additional dealer markup isn’t actually worth more used than it was new. That’s the craziness of our current supply/demand imbalance.
So what happens in 24 months when that Kia Telluride price has normalized and it has deprecated the way we all expect it to? The owner who financed that purchase is going to be looking at a sobering reality, their Telluride will be worth considerably less than what they owe on their current loan. If they want to move into a different vehicle they’ll have a tough pill to swallow.
The same reality is playing out in the used car market. With used vehicle prices highly inflated, consumers are financing purchases on used cars and trucks that aren’t worth as much as they appear to be right now. The negative equity position they’ll be in will be staggering. The first impact of the “bubble bursting” will be the reality that millions of Americans will owe thousands of dollars more on their auto loans than what their vehicle is actually worth. This will have some interesting effects on vehicle sales in the near future.
By now you are likely familiar with massive “online” car dealers like Carvana, Vroom, and Shift. Each of these companies has gone public over the past few years, and with valuations north of $50B, each has a lot of money to invest in growing their business.
What’s interesting about their business model (and Carmax’s too) is that they make most of their money not selling cars, but on selling loans, and ancillary products (extended warranties) tied to the purchase of a vehicle. To sell a loan or an extended warranty, you have to sell a car. Selling a car is actually really expensive. You have to find a vehicle to buy, recondition it so that it’s “showroom” ready, and then market it for sale.
Even with all that overhead, there is enough money in loans and extended warranties (and occasionally in the actual sale of the vehicle) that they make money (or at least make enough money to justify raising more capital from investors).
What happens when the bubble bursts and used vehicle prices fall? Each of these dealers will be looking at their portfolio of hundreds of thousands of VERY expensive cars they paid for that are NOT worth what they paid for them. Depending on how quickly prices fall, each of these companies could be looking at hundreds of millions of dollars in inventory that is worth less than what they paid for it.
In a “post bubble burst” world we’ll be looking at quarterly reports from each of these companies that discuss how they’ll need to offload inventory at a loss to free up cash to be able to purchase new inventory at a lower price. This practice is called cost averaging, and it’s inevitable it will happen. The companies that don’t handle this well will certainly suffer, and as consumers we may be able to benefit from some sort of “fire sale” if/when it happens.
There will be less in-market car buyers over the next five years
The third impact we see when the bubble bursts, is that there will likely be fewer in-market auto buyers. Like we discussed above, with expected negative equity positions to be very large, there will likely be a substantial number of buyers who take themselves out of the market when they realize that they owe thousands (if not tens of thousands) more on their current vehicle than what it is worth. We expect that many people will decide it makes more sense to hold onto their existing vehicle than “roll the negative equity” into a new loan and try to purchase another vehicle in 12, 24, or 36 months.
How can you protect yourself
If you need to buy a car in this market, there are a few things you can do to protect yourself.
Step one
Become educated about the market situation. Reading this article will help you, and we also suggest you watch a few of our recent YouTube videos to get up to speed.
Step two
Be aware of your local market conditions. Although the supply shortage is global in scope, be sure to understand your local market conditions by running a Market Price Report.
Step three
Get support negotiating with the dealer/seller. Post your OTD worksheet to the CarEdge Community Forum, or live chat with our Auto Advocates On Demand. No matter what, get a second set of eyes to review your deal before you sign the dotted line.
Step four
Get pre-approved for financing instead of relying on the dealer!
Step five
Be patient! We’ve heard from dozens of community members that they’re still able to get fair deals right now. It takes patience and persistence. You’ve got this.
CarEdge was founded in 2020. We specialize in providing a number of solutions to our members to help them secure a great deal on a new car. As a part of our comprehensive tools for car buyers, we also offer vehicle service contracts (“extended warranties”) through our partner company, AUL.
We interviewed many different extended warranty administrators in advance of deciding to work with AUL Corporation. There are a lot of “fly by night” companies out there, and AUL is not one of them.
AUL Corporation has been in business for 31 years. They are fully accredited with the BBB and have an A+ rating. Their BBB rating is 4 out of 5 based on 54 customer reviews, with corporate headquarters in Napa, California.
The reason we chose to work with AUL Corporation is because of their track record in the industry, commitment to customer service, and quality products.
CarEdge Extended Warranty Coverage Options
There are two big factors that need to be considered when you’re deciding which VSC (“extended warranty”) to purchase: Cost and coverage.
Costs
As we went over in our guide to vehicle service contracts, the cost of a VSC (“extended warranty”) is based on your VIN and the mileage of your vehicle. As such, your cost and quote may be quite different from the quotes that other consumers receive for their vehicle.
CarEdge promises to always be transparent in our pricing. Currently, we make a flat $500 on every VSC (“extended warranty”) we sell. That means the wholesale cost of the contract is the price you see when you self-quote minus $500. If we are required to change our pricing in the future, we will always provide a reason for the change. Our priority is transparency, so we encourage potential customers to reach out if they have any questions.
CarEdge Coverage
CarEdge’s VSCs are administered by AUL Corporation and are insured by American Bankers Insurance Company of Florida. We interviewed many different VSC administrators in advance of deciding to work with AUL Corporation.
AUL offers a comprehensive selection of coverage options under the umbrella of 15 different plans. These plans range from exclusionary coverage that will cover almost everything on your vehicle to stated coverages that are more hyper specific, along with some customizable levels of coverage.
Here at CarEdge we sell AUL’s Sentinel brand of products. There are four coverage options we are able to provide:
Supreme Plus
Supreme
Premier
Powertrain.
Supreme Plus is the highest level of coverage that most closely mimics a manufacturer’s new car warranty. Supreme, Premier, and Powertrain are all stated coverages that are more limited in scope. In the spirit of transparency, you can view a sample contract as well as a breakdown of specifically what is and isn’t covered by each level of coverage by logging into your CarEdge account.
Take note that there is no coverage for issues that relate to abuse, misuse, or neglect. VSCs (“extended warranties”) are intended to protect you from manufacturer defects, not other forms of breakdowns, like forgetting to change your oil or getting into a car accident.
All of the plans from AUL come with a few notable perks, including:
24/7 roadside assistance with towing
Trip interruption coverage of up to $100 per day for up to 3 days
Rental car reimbursement
Please note that our VSCs (“extended warranties”) are not currently available to customers in Massachusetts.
Customers will be able to choose any repair shop that has been certified by ASE or AAA. This includes any local dealerships. Covered repairs will be paid directly to the repair shop. However, repairs must have prior authorization before they begin, and because AUL has long standing relationships with dealers, a service advisor will handle this on your behalf.
A deductible may be applied, depending on the type of plan you choose. As with any VSC (“extended warranty”), you should be fully aware of the deductible before you sign the contract.
Where can I get repairs?
Customers will be able to choose any repair shop that has been certified by ASE or AAA. This includes any local dealerships.
What is the repair process?
If a light comes on in your dash, or you hear a clunking in the engine, you should go to a local dealership or an ASE certified repair shop. When you pull into the service lane, have your policy number handy, and provide it to the service advisor. The service advisor will conduct a diagnostic assessment of your vehicle to determine what the issue is and present that information to both you and AUL. If the repair is a covered repair you will pay your deductible and be on your way. If it is not a covered repair you may have an out of pocket expense.
Do you need a photo or inspection of my vehicle before I purchase the vehicle service contract?
If your vehicle is outside of it’s factory bumper to bumper warranty you will need to have a pre purchase inspection (PPI) performed. A local mechanic should be able to conduct a PPI for ~$100. There are national services as well, such as LemonSquad. We simply need a copy of your PPI report on file.
Can I cancel the vehicle service contract?
Yes, you can cancel the vehicle service contract and receive a prorated amount of your money back (based on either time or miles, whichever is greater). If you cancel your vehicle service contract within 60 days and there have been no claims made you will receive a full refund. There is a $50 “administration fee” at the time of the refund.
What if I sell my vehicle?
You can cancel the vehicle service contract and receive a prorated amount of your money back OR it makes a great incentive to a new owner! There’s a $50 transfer fee and the new owner will have the remainder of the coverage.
Does this overlap with the manufacturer warranty on my new vehicle?
Yes, if you purchase a vehicle service contract for a brand new vehicle you will have overlapping coverage during the period of your manufacturer warranty (typically 36 months and 36,000 miles).
Why would I buy a vehicle service contract on a new vehicle?
When you purchase a vehicle service contract on a brand new vehicle you’ll have more term options and cheaper prices available. For example, you may be able to purchase a 10yr/100,000 mile term on a brand new car whereas you might only be able to get a 5 or 6 year term with fewer miles later. Please check out the video here that explains things to consider while buying extended warranty on a new vehicle.
Why are your prices so low? Am I getting the same thing at the dealership?
Yes, you are purchasing the same type of product sold at a dealership. We cut out the middleman (insurance brokers), and make a few hundred dollars per vehicle service contract. The dealership marks up their vehicle service contract thousands of dollars, not hundreds, but thousands!
Who is backing this contract? Who are your partners?
CarEdge’s vehicle service contracts are administered by AUL Corporation and are insured by American Bankers Insurance Company of Florida. We interviewed many different VSC (“extended warranty”) administrators in advance of deciding to work with AUL Corporation. AUL Corporation has been in business for 31 years. They are fully accredited with the BBB and have an A+ rating. Their BBB rating is 4 out of 5 based on 54 customer reviews, with corporate headquarters in Napa, California.
Isn’t it better to buy a manufacturer vehicle service contract?
Believe it or not, many “manufacturer” vehicle service contracts are actually administered by third parties. Some manufacturers simply choose to “brand” a vehicle service contract with their name and it looks very enticing. We encourage you to do your research and check the coverage and price before making any buying decision. We reviewed manufacturer extended warranties here.
Are there any additional fees or yearly payments I have to make?
No. The price is the price and is a one time payment.
Are there any surcharges?
There are two surcharges that may apply.
A “Business Use” surcharge and a “Lift” surcharge.
If you use your vehicle for business such as Uber, Lyft, delivery services or if your vehicle is in a business name there is a surcharge.
If you have a lift kit (professionally installed before you purchase the vehicle service contract) there is a surcharge.
Is there a deductible?
There is a standard $100 deductible per repair order. You may have the option of a $50 or $250 deductible.
I do my own maintenance. Will that void my vehicle service contract?
No. If you perform your own maintenance on your vehicle it must be according to your owners manual and you must keep records of the maintenance. This means keeping track of what maintenance was performed, and receipts of materials used. You don’t want to be in need of repair because proper maintenance was not performed!
How to buy from CarEdge
Our partnership with AUL Corporation allows us to provide a top-quality VSC to our members. We chose to work with AUL due to their excellent plans, affordable cost, and great customer reviews. To purchase a VSC (“extended warranty”) from us, please create a free CarEdge account and self-quote your VSC. If you’re not sure you want to purchase from us, please schedule a 15-minute consultation call with us. We’ll be happy to walk you through VSC options, even if you don’t choose ours. You can do that from within your account as well.
“We’re calling you to tell you about your vehicle’s extended warranty …” If you’re like most people, seemingly everyday you get a spam call from an “extended warranty” company. Extended warranties, officially known as vehicle service contracts (VSCs) suffer from a lack of information disclosure and are represented as something more than they are with marketing designed to sell instead of inform. VSCs can be a great benefit to car owners, especially when you know exactly what to expect and how it can help you.
We’ve been talking about VSCs (“Extended Warranties”) here at CarEdge, since we first started educating car buyers. One of the first things we realized is that there was no one in the market providing honest information about VSCs to consumers. We decided to change that.
After conducting countless hours of research, and by leveraging our industry connections, we chose to partner with AUL Corporation to offer CarEdge members a VSC (“Extended Warranty”) at a great price. With AUL’s 31 years of experience in the industry and great customer reviews, we’re proud to work with them.
However, there is one issue: California is much more restrictive when it comes to VSCs. For this reason, we’re currently unable to sell them to California residents.
Because transparency is important to us, today, we’ll take some time to discuss the reasons that we are currently unable to sell VSCs in California. We’ll also discuss the options that currently exist for California residents.
Mechanical Breakdown Insurance: The “Extended Warranty” in California
Only one entity within the state of California can sell vehicle service contracts: car dealers. The car dealer lobbied the state of California to pass this monopolistic law that forbids any other business from selling vehicle service contracts to California residents who register their vehicle in the state.
So how do other third parties sell “extended warranties” in California? They actually sell mechanical breakdown insurance (MBI). Take note of the word “insurance,” as MBIs are actually regulated through the California Department of Insurance (CDI).
As a consumer, when you buy MBI, you are essentially buying a contract between the insurance company and yourself, just like you would with any other kind of insurance. As such, the CDI will carefully scrutinize and regulate the rates and coverage provided by the insurance program.
MBI is similar to normal car insurance in that it’s well regulated for consumer protection. Even though it is technically an insurance policy, though, it functions much like any other vehicle service contract in California would.
There are plenty of laws in California that regulate mechanical breakdown insurance. Because of these laws, the process is a little different than it is when you’re buying a standard extended warranty in other states. If you’re looking to dive deeply into this unique version of an “extended car warranty” in California, you can read more on the official California Department of Insurance website.
Mechanical breakdown insurance is the only form of mechanical coverage that can be purchased online in California. The CDI advises that consumers verify that any company that is selling MBI is licensed to sell it. To earn a license to sell an MBI policy, the policy itself has to be approved by the CDI. This means that they’ll go over every line, examine every level of coverage, and set standards that the company must abide by.
From the viewpoint of the consumer, the experience of using an MBI policy as compared to using a VSC will essentially be the same. It will simply feel like another form of an extended car warranty in California. You would take your car to a covered mechanic when a breakdown occurs and file a claim. From there, payment would be made directly to the shop by the coverage provider.
But if you’re looking to buy a vehicle service contract in California, you still can. You just have a much smaller window to make your purchase decision and you’ll be limited in who you can purchase it from. Let’s take a look at when you can buy one and where you can get it.
Can You Even Buy a Vehicle Service Contract in California?
Do you want to take one guess as to when you can buy a vehicle service contract in California? That’s right…when you’re buying your car from a dealership. While the decision to restrict VSCs in California was done to protect consumers, it’s given dealerships far more leverage than they have in other states.
In most states, you can buy a VSC at any point in time (presuming your car is still eligible, according to the company’s criteria). However, those who are looking for a vehicle service contract in California can only buy their VSC from a dealership at the time that they are buying their car.
Unlike other states, VSCs sold in California have special requirements, too. A VSC must list the dealership itself as the obligor of the contract, rather than a third-party company, such as the AUL Corporation. The dealership must also work with a backup insurance company that will cover any repairs that they deny.
In essence, you can still buy a vehicle service contract in California, but you will likely end up paying too much for it. Remember, you can still negotiate the price of a VSC if you are going to be buying it at a car dealership.
When Will CarEdge Sell an Extended Car Warranty in California?
We are currently exploring every avenue that will allow us to sell a top-quality MBI policy in California. Our partner, AUL Corporation does offer a MBI product in California, and we are actively pursuing the required licensing to be able to sell to our members in California.
Our stance on extended warranties is that every consumer should research their costs for common repairs, consider how long they’re going to keep their car, and consider their tolerance for risk. Anyone who comes out of that process with the decision that it’s time to buy an extended warranty should be able to buy one from a top-quality, transparent provider, even if they live in California.
We want our members in California to have the exact coverage that they’re looking for, while being able to negotiate a great deal for their policy. Keep checking our site for updates on this situation. We’ll do our best to keep all of our California members informed about when they will be able to buy a mechanical breakdown insurance policy from our partners.
Vehicle Service Contracts in Other States
For our members in other states, if you’re thinking about purchasing an extended warranty for your car, we recommend you get a quote from CarEdge. We will always be transparent in our pricing. Our current price model is to charge a flat $500 markup on all our VSCs. We will even offer a free consultation call to help you determine whether a VSC is the right decision for you. When you are ready to buy, you can now purchase a plan 100% online through CarEdge.
Vehicle service contracts, colloquially called extended warranties, are agreements that are designed to cover specific kinds of mechanical breakdowns. While these are similar to the warranty that comes with a new car when you buy it at the dealership, because it’s offered by a third-party vendor, it is not technically a “warranty”.
Extended warranties are a hotly debated topic in the car-buying world (in part because we’ve all been bombarded with phone calls trying to sell us on them). Our standard advice is to do your research on a variety of “extended warranty” providers and weigh the pros and cons of buying one versus not having one. We don’t suggest buying a vehicle service contract when you buy your car, unless you absolutely need to finance it (at which point other questions come to mind), and if you do purchase a VSC from the dealer, be sure to negotiate the price! You can buy a VSC at any point in time, as long as your car is eligible.
When it comes to the debate on Endurance Warranty vs. CARCHEX as a provider, you’ll need to examine several things before you make a decision.
In our extended warranty comparison, we’ll examine the CARCHEX and Endurance extended warranty costs, what’s covered under their plans, and the reviews of past customers that relate to each company. All of this information will allow you to make an educated decision.
Endurance Warranty vs. CARCHEX: Company Background
Understanding some basic information about a company can help you to decide if you want to do business with them. While you won’t be able to tell everything from a company’s BBB page or customer reviews, looking at these things is the best way to determine how a company might treat you.
Endurance Warranty
Endurance Warranty has been in business for 15 years. The company is based out of Illinois. They currently have a C+ rating with the BBB; however, they are not BBB-accredited.
Endurance Warranty’s BBB page currently has a warning that talks about misleading advertising practices that have been carried out by the company. The BBB has received multiple complaints about mailers that contain deceptive features and copy that makes them seem like government documents. The complaints from customers are part of the consideration in our review and overall recommendation.
CARCHEX
CARCHEX has been in business for 22 years. They currently have an A+ rating with the BBB and they are a BBB-accredited company. They are based out of Maryland.
There are currently no warnings or alerts on CARCHEX’s BBB page. In fact, there is actually some “additional information” presented that states that CARCHEX was a finalist for a Maryland business award, which is a good sign. This is a rare thing to find in a VSC company.
Endurance Warranty vs. CARCHEX: Coverage
Both companies provide similar coverages, however, there is one crucial difference; CARCHEX does not sell vehicle service plans directly. Instead, they sell you plans that are administered by a third-party company. While you’ll always be interacting with CARCHEX when you set up your plan and file a claim, the plan itself will be managed by a separate company.
What Is the Same Between the Companies?
When it comes to the battle of CARCHEX vs. Endurance Warranty, it’s easy to focus on the differences. Before we jump into those, let’s take a look at the areas in which they are similar.
Both providers offer different levels of coverage to help you choose a plan that will be the right fit for your needs. You may want simple powertrain coverage. Maybe you want a bumper-to-bumper plan. Either way, you’ll be able to customize your coverage with CARCHEX or Endurance Warranty.
Another similarity is the flexibility provided in the places that you can take your cars for repairs. Both companies offer plans that allow you to take your car to any certified mechanic shop for repairs. The vehicle service contract provider will pay the shop directly and you won’t have to wait for reimbursement. Make sure to call the mechanic ahead of time to ask whether they accept your VSC, since it is possible that they might not.
In this CARCHEX vs. Endurance Warranty review, we’ll be going over plenty of differences between plans and providers. However, one thing is constant for every plan sold through either company: there is no coverage for damage related to abuse, misuse, or neglect.
All issues must be related to a manufacturer’s defect in order to be covered. Other than the special plans offered for maintenance, there is no coverage provided for components that are designed to wear and tear. This includes components such as brake pads and timing belts.
Both plans also require that you keep records of every visit to the mechanic, whether it’s for a repair or for standard maintenance. If you are not able to provide these records, it’s quite likely that your claim will not be covered.
How much do these plans cost? As we’ve discussed in a past article on vehicle service contracts, the cost of a VSC is based on the VIN of the car in question and its mileage. Each VSC provider uses its own algorithm to come up with quotes based on this information. As such, the only way to know the Endurance Warranty cost or the CARCHEX cost is to request a quote with your unique vehicle information.
While we’d like to settle the Endurance Warranty vs. CARCHEX debate based on their prices, we won’t be able to do that, as prices vary dramatically between cars.
What Does Endurance Warranty Cover?
How does Endurance insurance stack up? Endurance Warranty provides six levels of plans, each with a unique level of coverage.
Secure: This basic plan provides coverage for powertrain components, such as the engine, drivetrain, and transmission.
Select Premier: This plan provides additional coverage for some electrical components, cooling system components, and fuel delivery system components.
Secure Plus: This program has the same coverage as the previous plans, with the addition of steering components.
Superior: As the highest component coverage plan, this plan covers almost every component in your vehicle, other than seals and gaskets.
Supreme: This “bumper-to-bumper” plan, also known as an exclusionary plan, provides coverage for everything that’s not specifically mentioned.
Endurance Advantage: This plan provides basic mechanical breakdown coverage, along with coverage for maintenance services.
Make sure to read any contracts that you’re given so that you can have a clear understanding of what’s covered under your vehicle service contract.
With so many plans being offered, it can be confusing to understand which one is best for you. In fact, we only have one sample contract available from Endurance Warranty to investigate. As such, you’ll need to investigate the specific coverage of the plan that you choose.
What Does CARCHEX Cover?
CARCHEX has five levels of plans to choose from, each with a coverage term ranging from 5-10 years. The five levels are:
Bronze: As the most affordable plan offered, the Bronze plan provides basic powertrain coverage, which includes coverage for your engine, transmission, cooling system, and drive train.
Silver: This plan adds to the previous plan, providing coverage for the air conditioning system, some electrical components, and the fuel delivery system, too.
Gold: Sold as the plan that’s best for cars with over 60,000 miles, this plan is said to cover most major systems in the car. It adds coverage for steering and braking, in addition to the coverage to the previous plans.
Platinum: This plan offers the highest stated level of component coverage, with coverage for a greater number of electrical components, heating and cooling coverage, and suspension.
Titanium: As their only exclusionary plan, anything that is not specifically excluded is covered under this plan.
CARCHEX provides sample contracts for one plan at each level. Take note that this doesn’t mean that the plan you are looking at will be the same as the one in the sample contract. You’ll need to request a quote and request a specific contract for the plan that you’re interested in. Examine this contract carefully and make sure that the coverage that you’re after is clearly stated within the contract.
CARCHEX has deductibles that range from $0 to $200, based on your selections and the vendor you choose. When it comes to the debate between CARCHEX vs. Endurance Warranty, CARCHEX is the only one with a $0 deductible option.
What Perks Do They Offer?
Many vehicle service contract providers package their services with other benefits to tempt people into becoming customers. We discovered that both providers have similar benefits. They both offer the following benefits with any of their plans:
24/7 roadside assistance, including lock-outs, battery jump starts, fuel delivery, and limited towing coverage
Limited trip interruption benefits
Rental car reimbursement
Endurance Warranty enrolls every new member in their Endurance Elite Membership program. Being in this program provides several additional benefits that are worth having, such as:
ID theft protection
Key fob replacement
Tire replacement or repair
Personal concierge services for reservations, emergencies, and other uses
This means that customers of Endurance Warranty will have plenty of useful benefits available that come with their plan, at least for the first year. You’ll have to make sure that you cancel this membership by the second year; otherwise, you’ll be on the hook for the cost of the membership.
We’d like to see more perks coming from CARCHEX, but it’s not a major drawback of their service. We’d never suggest buying a VSC based on the perks that come with it. Instead, it’s best to make your decision based on the cost, coverage, and company reputation.
Endurance Warranty vs. CARCHEX: Customer Reviews
Both Endurance Warranty and CARCHEX have been serving the automotive world for over a decade. This means that you should have plenty of evidence about how they might treat you based on the ways that they’ve treated past customers.
Today, we’ll look through some of the common themes of the reviews so that you can see the types of complaints that people are making against these companies, along with the types of practices that consumers are praising.
Endurance Warranty Customer Reviews
Endurance Warranty has a rating of 3.59 out of 5 on the BBB customer review site. This rating is the average of 1,088 customer reviews. Having such a high number of reviews makes their 3.59 rating seem like an accurate representation of their service. Let’s take a look at a few of the reviews they’ve received.
John H., one-star review
“Endurance scammed my 84-year-old mother for a year. They signed her up through aggressive tactics. Then, once I learned what my mom was paying to cover a car — my mom literally drove 18 miles total in 2020 — I called to cancel my mom’s contract. The ensuing phone call was over 15 minutes long as the customer service person I spoke with was overly rude and extremely condescending and berating to both my mother and me. Now, to finalize the ending of the contract, I have to get my mom to sign the cancellation form in front of a notary. This company is the worst and takes advantage of the elderly!”
La’Shawn B., five-star review
“The level of customer service I received was outstanding, which made my overall experience spectacular. The staff was well-informed and helpful. My questions and concerns were promptly addressed. I will definitely recommend this company to all my friends and family.”
Cori R., one-star review
“I thought I purchased the most comprehensive coverage available. I was shocked when the dealership called me back and said Endurance would not cover any of the repairs (tension drive belt, alternator drive belt, spark plugs, engine partitions, right rear comfort armrest that was draining the battery, etc)… All those repairs ($4k) were on me, and if I didn’t get them fixed, the Endurance agent told me they wouldn’t cover the engine or alternator if they needed repair. I pay $114 a month for this coverage. Complete garbage. Canceling ASAP! Do not recommend!”
Keep in mind that Endurance currently has an alert on their BBB page saying that they engage in intentionally confusing marketing tactics. This fact makes the first review seem entirely reasonable, and that’s not okay with us.
The middle review was a great example of the type of reviews that are all over their BBB page. There are plenty of satisfied customers who have just signed up, but haven’t filed any claims yet.
CARCHEX Customer Reviews
CARCHEX has a rating of 2.26 out of 5 on the BBB customer review site. This rating is derived from an average of 102 customer reviews. While it’s surprising that there aren’t more reviews to look through, it’s still plenty to use to evaluate CARCHEX.
Jordan K., one-star review:
“Bought an extended warranty. On October 7, 2020, CARCHEX received a complete packet from me about cancellation and told me I would be receiving a refund in 45-60 days. Here it is, December 23, 2020, and I still have not received a refund. They are great at taking your money in seconds, but when it comes to refunding it, they are horrible. This needs to be settled, one way or another.”
Mick O., five-star review:
“I was considering getting a secondhand car and called CARCHEX for a warranty quote. I did this apprehensively because I’ve heard about the horror stories of high-pressure sales, never-ending phone calls, and so on. I withheld my number and gave them a call. I gave Ryan my details and details about the car I was thinking about getting. He came back with a reasonable quote and told me what that covered. I glossed over that. He then made sure I understood the exemptions and what the warranty would ONLY cover. He then explained to me why the car I was looking at was so cheap — repairs run to multiple thousands for everything. He gave me some really good advice on buying a car and the pitfalls. He actively dissuaded me from the warranty and the approach I was thinking about. He’s a really great salesman — he put the customer first, not selling a product that might do half of what I wanted. I will definitely use this company again and would highly recommend their salesman, Ryan C.”
Dennis H., two-star review:
“Seemed good. Now, I’ve canceled my warranty after 4 days. Fighting to get my money back, getting a run-around. Said I had to respond to an email, but they don’t send an email. Called twice now.”
Response from CARCHEX:
“Thank you for your review. We have reached out to you and processed your request to cancel. With your purchase being inside our 30-day money-back guarantee period, your refund will appear in your account in 2-3 business days. Please give us a call if you have any additional questions or concerns. We can be reached at our phone number. Best, CARCHEX Customer Service Team.”
When going over the CARCHEX reviews, one of the first things we noticed was that almost every review has an official response from CARCHEX. That’s something that we love to see.
Most of the reviews tended to be about buying or refunding the policy, not speservicing it. This could be taken as a good thing, since there weren’t many reviews complaining about a lack of coverage. We’re happy to see one review detailing a time a customer service representative went above and beyond, too.
Endurance Warranty vs. CARCHEX: Who Do We Recommend?
When comparing Endurance Warranty and CARCHEX, we’ve examined background information, coverage details, and customer reviews. While both companies have mixed reviews, if you were to choose between the two, we would recommend CARCHEX over Endurance Warranty. This is because of the aggressive tactics being used by Endurance Warranty that we do not agree with.
It’s worth remembering that CarEdge also offers vehicle service contracts.
Our VSC has transparent pricing, and you can meet with one of our team members to have all your questions answered for free. Not to mention, AUL (our partner) has great customer reviews.
We chose to work with AUL due to their excellent plans, affordable cost, and great customer reviews. Still not sure? Schedule a 15-minute consultation call with us. We’ll be happy to walk you through VSC options, even if you don’t choose ours. Create a free CarEdge account to schedule your call today.
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What if I don’t live in these states? If you're outside these areas, don't worry! We're committed to making sure everyone can enjoy our deals. Although the delivery fee will not be waived, you can still purchase from CarEdge and either pay for shipping or coordinate pickup at a participating dealer.
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